Shares in embattled Chinese developer Evergrande have plummeted by more than 80% as they resumed trading in Hong Kong for the first time in a year and a half. The company’s stock price took a significant hit after it posted a loss of 33 billion yuan ($4.5 billion; £3.6 billion) for the first six months of the year. However, this was an improvement from the 66.4 billion yuan loss reported during the same period last year.
Evergrande is currently grappling with a real estate market crisis that poses a threat to China’s economy, the second-largest in the world. Despite reporting a 44% increase in revenue for the first half of 2023, reaching 128.2 billion yuan compared to the previous year, the company’s cash reserves declined by 6.3% during the same period.
The suspension of Evergrande shares from trading since March 2022 has contributed to the uncertainty surrounding the company’s future. In a bid to safeguard its assets, Evergrande filed for bankruptcy protection in the United States earlier this month.
The challenges faced by Evergrande have amplified concerns about China’s property industry and its impact on the global post-pandemic recovery. Another major Chinese developer, Country Garden, recently warned of a potential loss of up to $7.6 billion (£6 billion) for the first half of this year. Moody’s, a renowned rating agency, downgraded Country Garden’s rating, citing “heightened liquidity and refinancing risks”.
The Chinese government’s implementation of stricter regulations controlling the borrowing capacity of real estate firms in 2020 has created significant turmoil within the industry. Evergrande, once the top-selling developer in China, accumulated debts exceeding $300 billion as it aggressively expanded, positioning itself as one of the country’s largest corporations.
In an effort to address its financial troubles, Evergrande has been engaging in negotiations with creditors to restructure its agreements following debt repayments.
The filing for Chapter 15 bankruptcy protection in the US allows Evergrande to safeguard its American assets while it works toward resolving its debt burdens. However, the repercussions of Evergrande’s financial difficulties have spread throughout China’s property industry, resulting in several other developers defaulting on their debts and abandoning incomplete building projects across the nation.